The rise of remote work has put the spotlight on outsourcing as a staffing model. As companies move to leverage their resources to attain business goals, they explore new ways to cut costs while improving operational efficiency. This is where outsourcing comes in. In 2019, the global outsourcing market was valued at US$92.5 billion, up by US$7 billion from the prior year. With the pandemic having forced people to run operations remotely, this trend is likely to stay. A survey by the Statistic Brain Research Institute found that 4 in 10 U.S. companies opted to outsource their projects to reduce costs.One area of outsourcing that is gaining attention is staff augmentation. In this ebook, we will identify signs to keep an eye on to know whether staff augmentation fits your company and explore the ways in which this outsourcing model can help a company.
What is staff augmentation?
Staff augmentation refers to the process of outsourcing external personnel to meet business objectives. This method enables a company to tap skilled individuals on a temporary basis to work on a project or part of a project. These individuals typically come from a staff augmentation agency and are then directly managed by the company or client. This outsourcing model has become an attractive option for many companies because it allows them to enhance the scalability of their products and services based on prevailing market demand. Here’s an example: Company A needs to produce a white paper on digital marketing trends. It already has three writers, a copy editor, and a managing editor, all of whom are employed in-house. But to complete the project, it also needs to employ two graphic artists. Company A can tap a staff augmentation agency to look for the right individuals that meet its requirement and facilitate their onboarding in a short span of time, without causing any delay to the white paper’s target publication. Once the project is over, they can part ways with the temporary workers without any legal complications that usually come with hiring permanent, full-time employees.
Staff augmentation in IT
Staff augmentation is a popular talent solution in the IT industry where best practices and skills can change in the blink of an eye. The fast-paced nature of the tech space requires practitioners in this field to constantly upgrade their knowledge base and skills to catch up.Although some aspects of a company’s IT department operate in a steady manner such as IT queries, network management, and data backup, special and one-off projects become inevitable. These new IT projects become even more common as companies realize the importance of having custom software to run their businesses. Companies whose target market relies heavily on technology such as apps and social media must also take advantage of custom software to meet demand. For other firms, enterprise cloud software may be necessary to streamline their internal processes. These, and other use cases, highlight the huge role that tech plays today. But as the skills required to meet these needs become even more specialized, hiring full-time employees may be a lengthy and costly process. With an augmented staff model, companies can leverage their existing resources and have more flexibility to respond to the demand.
Signs that staff augmentation is right for your company-
While staff augmentation has become the cost-efficient and practical solution for many businesses, it is not for everyone. To help you weigh your options, here are some signs that your company needs staff augmentation:
- Someone in your team is due for a maternity leave or a long vacation and you need to find a substitute for those roles.
- Your company is expanding rapidly and needs highly specialized skills to outsmart your rivals.
- Your company has a high turnover rate and needs a reliable source of talent within a short time frame to avoid business disruptions.
- You do not have enough talent to accomplish a new project and your current manpower is already burdened by too many tasks.
- You have a new project but do not have the required skills to accomplish it. Most importantly, the required skills are a one-off need and will no longer be necessary after the launch of the project.
Types of staff augmentation
The staff augmentation models come in three types based on the level of skills required by a company. Let’s take a look at each of them:
Commodity: This applies when a company requires a reliable external workforce to perform a one-off project but does not need a specific skill set. Some examples of commodity staff are factory or warehouse workers for basic tasks, manual labor, retail agents, and events coordinators.
Skill-based: This is done when a company needs specific skills that are not critical or highly specialized. These skills include spreadsheet use, encoding, and transcribing, to name a few. Clerical work, basic copywriting, and data processing are just some examples that fall under this category.
Highly skilled: This category requires a special set of expertise and intensive training. Workers from this category have more experience and possess skills that are hard to find elsewhere. This includes software engineers, data analysts, cloud security, and information architecture, among others.
Staff augmentation and other models
It is not uncommon for the staffing industry to come up with new terminologies to keep up with the changing employment landscape. These new terms may not be boxed in a single definition and be open for new meanings as trends evolve. Oftentimes, staffing models have a tendency to become muddled and overlap with each other. Even experts and industry practitioners sometimes disagree on how to define and differentiate one term from another. If you are a client deciding on which vendor to tap, it is important to know the difference of staff augmentation from other models so you can align your expectations and business objectives.
Versus managed services
Staff augmentation is often interpreted as the same with managed services due to their shared features. But there is actually a major difference between these two models. While staff augmentation lets the company determine what to do and how to do it, managed services commit to deliver a specific outcome at an agreed price, regardless of the manner and process by which that outcome is achieved. Managed services often have full control of the project management and execution, while staff augmentation lets the company (client) maintain project autonomy. In terms of payment, augmented staff are paid based on hours worked, while managed services workers are billed on retainer, making them more suitable for longer-term projects.
Versus project outsourcing
Another model that tends to share a grey area with staff augmentation is project outsourcing. Also called “out tasking,” project outsourcing enables a company to work on a project using the resources of another firm. Just like staff augmentation, this model helps improve scalability and avoids legal risks. However, it is more cost-efficient when it comes to training and management overhead expenses. And unlike the augmented model, project outsourcing gives the company less control over the project and is more vulnerable to internal resistance.
Versus dedicated team models
Having a dedicated team has similarities with outsourcing projects. With this model, a company is partnering with a remote team and is handing over the entire project to that team’s members. In IT, a dedicated team model is much wider than staff augmentation as it includes other areas of software services such as UI/UX design, project management, design, and analysis. This approach is much more in-depth, which means the client has higher performance expectations. In terms of the cost, a dedicated team vendor handles office space costs, software licenses, employee benefits, and training expenses, among others.
Benefits of staff augmentation
Many companies adopt the staff augmentation model to enhance efficiency while meeting seasonal demands or temporary projects. Here are five factors by which staff augmentation can benefit your company or business.
Cost efficiency
Staff augmentation does away with a slew of expenses that usually come when hiring permanent employees. The most common resource of staff augmentation is a contingent workforce, which refers to a labor pool that a company signs through an agency on an on-demand or project basis. A contingent workforce includes gig workers, freelancers, and independent contractors. Unlike regular staff, these workers are not covered by statutory or government-mandated benefits such as paid time-offs, maternity and paternity leaves and packages, health insurance, and severance pay, to name a few. Hence, staff augmentation is a great way to save on costs while addressing a temporary demand or business need. On many occasions, augmented staff work remotely. This means your company does not have to spend on physical assets such as computer chairs, work desks, and IT peripherals.
Time efficiency
Staff augmentation can help you fill temporary posts within a short period. Since the resources are being handled by an agency, you already have easy access to a labor pool that matches your needs, no matter how specialized they are. Headhunting often takes too much time and effort for permanent roles but having a dedicated vendor for temporary positions makes the process smoother and more time-efficient. According to a research by employment review website Glassdoor, the average hiring process takes 23 days. If you have an urgent project, spending more than three weeks on hiring may not be a good solution. But with a staff augmentation model, you have a better chance of finding and hiring workers within days, an impossible feat to achieve when looking for permanent and highly technical roles.
Full control
Another benefit of staff augmentation is having full control of your on-demand workers. Unlike other outsourcing models, staff augmentation lets you treat your temp staff like in-house employees in such a way that you are allowed to dictate what tasks to accomplish and how to accomplish them. This means your company is directly involved in the workflow, its implementation, and the progress tracking. Your augmented staff will also be required to adapt to your company’s existing processes and policies instead of relying on their own. In turn, your company is expected to provide training to your augmented staff so they can help improve the scalability of your services and products.
Flexibility
The augmented model gives your company the flexibility of scaling up or down based on demand. It is ideal if you need to respond to a one-off project without being bound by the same responsibilities as when hiring a permanent workforce. This on-demand response is a competitive edge that you can use to outdo your competitors in this talent- and tech-driven business landscape.
Easy access to specialized skills
An augmented team is sourced via a third-party vendor that already has a pool of talents catering to specific niches. This means you can have access to any type of worker that matches your requirements, notably those with highly specialized skills. Since these vendors operate with different branches across the world, you can take advantage of as many talent options as you want minus the constraints of geography.
Cons of staff augmentation
Much like other outsourcing models, staff augmentation also brings several drawbacks that must be addressed right away to prevent them from weighing on the company’s productivity. Let’s examine the three most common challenges of staff augmentation.
Cultural differences
To achieve reduced costs, vendors source their augmented workforce from other countries where labor is far cheaper. This means the company and its augmented staff may have cultural differences that could lead to roadblocks if not addressed properly. These differences may include race and ethnicity, religion, and gender roles. To prevent this from happening, companies must make a conscious effort to learn more about the cultural practices of the country that their augmented workers come from.
Training may be intensive
Although a staff augmentation model will give you the best candidate there is to fulfill your needs, training is still necessary. In fact, staff augmentation may require more intensive training than other models such as managed services since workers need to adapt to the company’s internal processes. Your company needs to educate your augmented staff about in-house practices and in return, those workers may take some time to adjust with how your company operates. This can slow down your productivity, so it is best to take training into consideration when outlining your targets for a project.
Communication barrier
One of the biggest challenges of working with augmented staff is the language barrier. Staff outsourced from other regions who are not fluent in English may have trouble expressing their thoughts, making it a potential barrier to the team’s overall communication efforts. In worse cases, this challenge can result in mismatched expectations and dissatisfaction between the client and the external workforce. To avoid this, your company should identify the project’s objectives in writing and assign a point person to handle all communication-related needs. Your company should also make an effort to respond to your staff’s concerns despite differences in timezone, as well as utilize apps and tools that facilitate team communication such as Slack, Discord, and Microsoft Teams. If possible, work out a schedule where teammates from different timezones have overlapping shifts even for just a few hours.
